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‘annus horribilis’

It is already very clear to everyone involved in the top end real estate market in France that 2012 is shaping up to be the ‘annus horribilis’ that many feared. The euro crisis, together with a deleveraging market, are causing problems on a major scale. All but the delusional accept that transactional volumes have evaporated and the market is experiencing a stasis unseen for decades. Since 2008, when the current financial crisis first reared its head, there has been a shocking denial of reality. A serious case of the Emperor’s new clothes, perhaps? Who has been deluding whom we ask?

Thankfully, most, if not all players in the market are now accepting that things have changed. Not before time!

We have long argued that vendors should bend to the prevailing economic winds. Selling agents have clearly had a duty to maintain confidence over the last four years, but even they now recognise the position we all face and are actively pursuing price reductions across the board in an attempt to persuade would-be buyers that there are deals to be done and to try and ‘make a market’. We heard the ‘mood music’ sooner than most and today, in certain circumstances, would definitely advise that the time is right to push hard to ‘do a deal’. An appealing well-located house with a motivated vendor is a powerful combination even in these straightened times.

However, it is unlikely that the market will return to normal functionality until there is some clarity about the Eurozone. Buyers are naturally wary of investing in a Euro-denominated asset if they fear that the asset will decline in value in Euro terms. What happens if all member states revert to their national currencies? If I buy now and subsequently France reverts to the Franc, what happens?

The view from Hindle & Baldock is fairly sanguine.

We recognise that the overall appetite for most people to purchase a second or even third home in France is probably rather low down the list of priorities at the moment. No real surprise there. Our view is that the only way that this market will be ‘jump started’ will be by high net worth individuals and their families who understand that the risks to their wealth are actually pretty low and become early adopters and start turning this bearish market in a more bullish direction.


  • Firstly, the market is finally behaving as it should. As any schoolboy economist knows, it’s all about supply and demand, and yes, a smidgeon of price inelasticity! The good news – for buyers – is the elastic is now breaking and demand is low. Ergo, prices are coming down, albeit begrudgingly. This will allow new entrants on the ‘buy’ side of the market to pick up the best deals. We need more of this to restore the market to health.
  • Secondly, the Euro itself is finally beginning to succumb to the forces of economic gravity. Not before time, some might say! Potential buyers converting from US dollars, US dollar pegged currencies or Sterling have seen a significant increase in buying power over the last 3 months. For example, a buyer of a €1m property if converted from Sterling is about £50k better off than at the beginning of 2012. That starts becoming significant. More of the same please.
  • Thirdly, and in many ways most importantly, is the understanding of what happens if the Eurozone falls apart. There is no doubt the immediate impact would be significant. There would be a crisis of confidence and a large degree of panic. However, any cool analysis of this scenario would indicate that normal service would resume fairly quickly. It really is not that long ago that the Euro did not exist and strangely enough, we all managed just fine!

So what if I bought my house in Euros and suddenly it was denominated in Francs?

Our view is that that the actual value would not change at all. For all we care it could be denominated in Cowrie shells! The real point is that we deal in a market that is subject to international demand. The reasons people want to buy in France will not be subject to whether we deal in the Euro or the Franc. They want the lifestyle, climate and all the other fundamental attributes that make the South of France the most blue chip international destination in the world, irrespective of currency.

Whatever the analysis, it really is down to schoolboy economics coupled with a touch of crystal ball gazing. That said, if you are at a time of life when you just want to get on and buy then it seems to us that despite the gloom in the world you might as well get on with it. There is a fantastic deal to be done out there…

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